Fannie Mae (FNMA)

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Higher Mortgage Costs and Reduced Credit Availability Would Result from FHFA Proposed Capital Rule for Fannie Mae and Freddie Mac, Coalition Says

WEDNESDAY, SEPTEMBER 2, 2020

In public comment letter, civil rights, consumer, and housing groups warn of proposal’s harm and its “acute impact on low- to moderate-income families and families of color”

Groups offer recommendations for the housing regulator to fulfill its and the Government-Sponsored Enterprises’ (GSEs) statutory public mission
Washington, D.C. – Today, the Center for Responsible Lending (CRL) along with a broad coalition representing millions of Americans released its public comment letter critiquing the Federal Housing Finance Agency’s (FHFA) proposed capital rule for Fannie Mae and Freddie Mac, Government Sponsored Enterprises (GSEs) overseen by the FHFA. Fannie and Freddie provide financial backing for about half of all mortgages in America. The amount of capital that the GSEs are required to hold has a major impact on the cost and availability of mortgage credit.The comment letter is linked here and its Executive Summary is included at bottom.
The letter was submitted by: CRL, Consumer Federation of America, The Leadership Conference on Civil and Human Rights, NAACP, National Association of Hispanic Real Estate Professionals, National Association for Latino Community Asset Builders, National Association of Real Estate Brokers (NAREB), National CAPACD, National Community Reinvestment Coalition (NCRC), National Community Stabilization Trust, National Fair Housing Alliance, National Housing Conference, National Urban League, and UnidosUS.
Fannie Mae and Freddie Mac receive substantial public support and have an explicit public interest mission. The letter warns that the “proposed rule’s approach would unnecessarily increase costs and reduce mortgage credit availability, with an acute impact on low- to moderate-income families and families of color.”
The letter states that “the proposed rule erroneously treats the GSEs as banks and therefore requires bank-like capital. This leads to gratuitously high capital levels that run directly contrary to the GSEs’ charter mission to promote access to mortgage credit to underserved borrowers, to serve a countercyclical role in the mortgage market, and to FHFA’s duty to reasonably support the safety and soundness of the GSEs and U.S. housing finance system.”
The comment letter says that the FHFA’s plan is “critically flawed as written” and makes several technical recommendations. Additionally, the letter recommends that the GSEs should be regulated as utilities to promote affordability and more equitably serve low- to moderate borrowers and families of color, as well as to promote safety and soundness of the GSEs. The Center for Responsible Lending has issued a report outlining why and how to “Treat Fannie And Freddie As Utilities.”

https://www.responsiblelending.org/media/higher-mortgage-costs-and-reduced-credit-availability-would-result-fhfa-proposed-capital-rule